Final answer:
The answer to the student's question on horizontal analysis is D) to determine the amount and/or percentage increase or decrease that has taken place. It involves assessing changes in financial data over time, similar to how a time series line graph shows changes in variables like the unemployment rate.
Step-by-step explanation:
The student's question pertains to horizontal analysis, which is a method used in accounting and finance to evaluate changes in financial statement data over a period of time. The correct answer to the student's question is option D) to determine the amount and/or percentage increase or decrease that has taken place. This method does not rely on arranging the numbers from highest to lowest (option A) or lowest to highest (option B), nor is it specifically used to identify errors in the data (option C).
For example, if we look at a time series graph of the unemployment rate since 1975, the horizontal axis would indicate the time, and the vertical axis would show the unemployment rate. By plotting points for each year's unemployment rate, this graph can visually demonstrate how the unemployment rate has changed over time, increasing or decreasing.
In economics, line graphs are commonly used to display continuous data such as prices, wages, and quantities bought and sold. These graphs are valuable for observing trends and making comparisons over different time periods.